Devil’s in the details of Obama plan to punish pricey universities

President Barack Obama delivers the State of the Union address in the House Chamber at the U.S. Capitol in Washington, D.C., Jan. 24, 2012. (Official White House Photo by Pete Souza)

When Southern Illinois University at Edwardsville raised its price by 59 percent, it landed directly in the crosshairs of the Obama administration.

Under a plan proposed by President Barack Obama in his state-of-the-union address in January, universities and colleges like SIUE that increase what they charge students at the fastest rates would forfeit their eligibility for some federal financial-aid money.

“Let me put colleges and universities on notice,” the president said. “If you can’t stop tuition from going up, the funding you get from taxpayers will go down.”

The Obama administration wants to judge universities by the increases not in their tuitions, but in their net prices, which means the actual cost of attendance—including transportation, room, board and books—minus financial aid.

At SIUE, that includes gas used by pharmacy and nursing students to drive from the rural campus to clinical rotations up to 100 miles away. And when rising gas expenses for those students were added in to the school’s low base price for all of their classmates—even though the cost of gas was beyond the university’s control—the net price skyrocketed.

“It’s misleading, the way they’ve calculated this,” said Elizabeth Keserauskis, assistant vice chancellor. “It makes it look as if we have a high net price.”

In fact, SIUE has the second-lowest tuition, mandatory fees, room and board of any four-year public university in Illinois—$21,663 per year for in-state students. And that turns out to be another thing that would be figured into the decision about whether it would be punished for its hike in prices, according to details of the president’s proposal.

Under the plan, which requires congressional approval, universities and colleges would also be measured on their base prices and the proportion of their enrollments made up of low-income, first-generation college-goers and other underrepresented students, U.S. Department of Education officials said.

“Our policy goal is that we want to reform campus-based aid programs to shift aid to campuses that are providing good value,” said Under Secretary of Education Martha Kanter.

Taxpayers poured $157 billion into federal financial aid in the year that ended on Sept. 30, up 17 percent from the year before. The president proposes using a small fraction of that total to reward or punish participating universities for their pricing policies.

Three programs would be affected, all involving money funneled by the federal government to individual institutions, which administer the programs: Supplemental Educational Opportunity Grants for particularly needy students, Perkins loans, and work-study, which provides financial aid in exchange for part-time work.

These three programs together cost $2.7 billion annually, though the president has also proposed that they be increased to more than $10 billion.

Even that, said Terry Hartle, a senior vice president at the American Council on Education, may not be enough to make universities do things differently.

“Is the amount of money that’s involved enough to alter the behavior of institutions and state legislatures that set tuition prices? That’s not clear,” said Hartle.

The government has already sought to embarrass universities and colleges whose prices rise the fastest by publishing their names on a list that higher-education officials call the “Hall of Shame.” But several of the universities at the top of that list appear to have demonstrated that there were errors in the calculations, some of them their fault and some the Department of Education’s.

In the case of the University of Hartford, for example, whose cost is listed as having increased 162 percent between the 2006-07 and 2008-09 academic years—the most recent period available, and the one that’s used for all the institutions in the “Hall of Shame”—the department reports its price as being one amount in one document and a different, lower amount in another. The university says its rate of increase was actually 2.9 percent.

Some higher-education experts said that, because there was nothing at stake but reputation in these figures until now, no one looked particularly carefully at them. At Rogers State University in Oklahoma, for instance, an administrator used national averages to compute the cost of living, rather than the much cheaper cost of living in rural Oklahoma. That mistake made the net price look as if it had increased 76 percent.

At Heritage University, a private institution in central Washington state, costs were raised intentionally, part of an effort to hire more full-time faculty, improve student services and upgrade facilities. Doing so doubled the net price.

But the base price at Heritage remains $15,000—comparatively low for a private university. Ninety percent of its students are low-income and first-generation college-goers, 55 percent are Hispanic and 15 percent are Native American.

People who see the percentage increase in his institution’s price, said President John Bassett, “say, ‘Gee, I saw you on that list,’ and then I go through that explanation and they say, ‘Oh, okay, I see.’ ”

The former chairman of the board of the National Association of Independent Colleges and Universities, Bassett said interpreting increases in net price “is nuanced, and it is complex, and the reasons for the large percentage increase [are] complex, but it’s also a question of what the percentage increase is on top of.”

Northern New Mexico College’s net price rose 67 percent because it switched from being a community college to awarding bachelor’s degrees, said Anthony Sena, provost. But the base price remains under $7,000 a year.

That would likely spare it, under the president’s proposal, from losing campus-based financial aid. So would the fact that 75 percent of its students are Hispanic and 15 percent Native American.

Still, the uncomfortable spotlight is already forcing some universities to change the way they do things—and not always to the benefit of students.

At SIUE, for instance, the university sharply reduced its estimates for student gas outlays by averaging the cost among all 14,235 students, instead of the full amount paid by the 200 who commute to their clinical rotations.

That means those students can no longer borrow toward their gas expenses, because lenders will cover only up to the maximum of a university’s reported net price.

“Unfortunately, that’s going to result in difficulty for some students,” Keserauskis said.

The Hechinger Newsletter

We cover inequality and innovation in education with in-depth journalism that uses research, data and stories from classrooms and campuses to show the public how education can be improved and why it matters.